Avacta Group, a clinical stage oncology drug company and developer of diagnostics, has conditionally agreed to acquire Launch Diagnostics for an upfront cash consideration of £24 million with an earn-out based on future business performance capped at £13 million. The acquisition is the first step in a M&A-led growth strategy by Wetherby-based Avacta for its diagnostics division, with the vision of building an integrated and differentiated IVD business with global reach serving professionals and consumers. The company believes that there is a significant commercial opportunity in the EU and the UK markets, which are fragmented, to build its position in the immunodiagnostics and molecular diagnostics value chain by acquiring companies that are complementary to Avacta’s core strengths in research and development. Launch Diagnostics is an independent IVD distributor in the UK with over 30 years’ track record, with its headquarters in Kent and around 70 staff. It provides immunodiagnostic and molecular test products, technical support and maintenance to healthcare providers. Launch Diagnostics serves private and public sector customers throughout the UK, France, Belgium, Luxembourg and Republic of Ireland, with 95% repeat business. Key management of Launch Diagnostics will remain in place with the exception of principal selling shareholder who will retire and will be replaced by a Managing Director from within the business. Avacta intends to run Launch Diagnostics as a separate business, retaining the brand and culture that has driven its success. Dr Alastair Smith, Chief Executive Officer of Avacta, said: “This acquisition will add an established distribution channel to Avacta with three decades of customer relationships and deep market knowledge to drive future product development, strategy and growth. It is the landmark first step in our ambitious M&A-led growth strategy for Avacta’s diagnostics division that has been a year in the making. “Our vision is to build an integrated, differentiated, global reach IVD business serving professionals and consumers, that uses the benefits of its Affimer platform to differentiate immunodiagnostic products in a competitive market. This is a transformational moment for Avacta Diagnostics, adding a well-established route to market for existing and future in-house and acquired products in the UK and across several key European markets.”

Cost pressures, falling revenues and a growing reliance on debt to prop up cashflows are among the gloomy findings of the latest Small Business Index (SBI) from the Federation of Small Businesses (FSB). The quarterly temperature-taking survey reveals the greatest level of pessimism among small business owners outside of lockdowns, with a net confidence score of -35.9 in Q3 2022, down 11.2 points compared to the previous quarter. Almost half (43%) reported falling revenues over the three months to October, compared to less than a third (32%) reporting an increase. Over the coming three months, four in ten (41%) expect revenues to decrease. Rising costs continued to affect the vast majority of small firms (89%), with nearly two in five (38%) seeing costs increase by more than 10%. The primary cost factors are utilities (60% of respondents), fuel (57%), inputs (48%), and labour (43%). More than two thirds (68%) of small business employers have increased wages over the last year, with the average wage increase 4.5%. For the third consecutive quarter there has been a rise in the number applying for finance (13% in Q3, compared to 9% in Q1). Of those, nearly half (46%) have turned to finance to help manage cashflow, up from 35% in Q2. Only a quarter (25%) applied for finance to expand their business, down from 29% the previous quarter. One in five (20%) finance applicants failed to find an offer with an interest rate below 11%, while the majority of successful applicants (57%) were offered rates between five and 10%. FSB development manager, Natalie Gasson-McKinley, said: “Small business entrepreneurs are, by their nature, an optimistic, dynamic and innovative bunch, which is why it is all the more stark to see this plunge in confidence. They want to be driving growth and economic recovery, but the headwinds against them right now are gale-force. “Recent political and economic turmoil hasn’t helped, which is why it is vital the Government focuses on stability, including delivering on its promises to help with energy bills for small firms and to reverse the hike in National Insurance. That money must be in the pockets of small firms by next month, no ifs, no buts, followed by clarity on what will happen after the initial six-month period. “While the new Chancellor has focused in his first days on reassuring markets to bring economic stability, he will need to turn again later to pro-growth measures, including revisiting issues such as IR35 changes and the decision to raise the equivalent of National Insurance for hard-working entrepreneurs who are paid via dividends. Raising taxes now will not generate growth, and we risk seeing high taxes with low or no growth for the foreseeable future. “Taking more small firms out of business rates, which they’re clobbered with before they’ve earned a penny, would be a positive, pro-growth step. In time, there should also be a review of the level at which the higher rate of Corporation Tax kicks in, reducing a barrier for ambitious smaller companies. “The Government’s own new annual figures show that two years of Covid has left the small business population smaller by half a million small firms and the self-employed. This gap of missing entrepreneurs, alongside those that have left the jobs market, should be the focus of medium-term growth measures, to help small businesses start up, grow, and recruit, after getting through the toughest of winters.” FSB is also urging ministers to tackle a systemic problem in the economy on late payments, which would not require expenditure at a time of focus on public finances. More than half (54%) of small businesses had their cashflow woes in Q3 compounded by the late payment of invoices, often by bigger business customers. More than a quarter (27%) said late payments are becoming an increasing problem, up from 22% in Q2. Business-to-business (B2B) firms were the biggest victims, with the worst affected including those in the manufacturing sector (67%); professional, scientific and technical activities (65%); and construction (64%). Natalie McKinley added: “The anti-growth late payment culture is a block on investment and economic recovery. If the UK Government is serious about going for growth, addressing this pernicious problem should be high on the urgent to-do list. “Audit committees of big corporates must be made accountable for payment practices. Meanwhile, ministers must double-down on blacklisting big businesses which treat their smaller suppliers and contractors badly from landing lucrative taxpayer-funded contracts. This is a way of promoting growth without a price tag for the Exchequer. “Giving more public sector contracts to smaller businesses should also be prioritised, at a time when there is an acute need to get value-for-money for taxpayers. Widening competition in public procurement by making more contracts suitable for small firms would save taxpayers’ money while driving up standards. It’s a no-brainer.”

Growth prospects for many firms are being squeezed by inflation, which went back to its 40-year high in September, according to experts at the British Chambers of Commerce. The organisation’s Head of Research David Bharier said:“Food, housing, transport, and household goods and services all remain major contributors to the increase. Producer Price Inflation, running at 20%, remains near record highs, and shows the scale of input price rises businesses are having to absorb. “With the Bank of England set to raise interest rates even further in the coming weeks, businesses now find themselves caught in a pincer movement between rising input and borrowing costs. “The economy looks to be on the cusp of recession, and with the Chancellor signalling that energy bill support may not go beyond six months the outlook is bleak for many firms. “It is now critical that Ministers listen to the Chamber of Commerce Network to understand the extent of the problems piling up at firms’ doors. “Businesses will need to see a clear long-term economic plan to provide a stable environment to invest, alongside specific measures that relieve unprecedented inflationary pressures.”